Tesla (TSLA) reported better-than-expected financial results for the second quarter late Wednesday, even as auto price cuts and rebates kept gross margins below the “floor” 20% Tesla has targeted in the past. TSLA shares fell early Thursday.
Tesla reported second-quarter profit growth of 20% to 91 cents per share, while revenue increased 47% to $24.93 billion. Analysts expected earnings to rise about 4% to 80 cents per share on total revenue of $24.22 billion, up 43% from last year.
Meanwhile, gross profit grew 7% to $4.53 billion. Gross gross margins came in at 18.2%, down from 19.3% in the first quarter and down 682 basis points year-over-year. Automotive gross margins, excluding regulatory approvals and leases, were 18.1%, down from 18.3% in the first quarter.
That’s less than the 20% gross margin that Tesla previously targeted. Before the earnings, a slew of analysts rang warning bells on gross margins.
“The short-term differences in gross margins and profitability are really slight compared to the long-term picture,” CEO Elon Musk told investors on Wednesday.
“The autonomy would make all of those numbers look ridiculous,” he added during the second-quarter earnings call.
Tesla stock fell 4.3% early Thursday during pre-market trading. The losses started during the earnings call on Wednesday. During normal trading on Wednesday, the TSLA Index was down 0.7%, at 291.26.
Analysts focus on margins
Wedbush analyst Daniel Ives, a longtime Tesla bull, said a big focus is on gross margins for cars “to gauge the impact of price cuts and what this means for margins going forward.”
The Wedbush analyst writes that it expects gross margins for Automotive to be around 17.5%. However, Ives added gross margins “should ease (upward) over the next quarters and back towards the 20% level heading into 2024”.
On Tuesday, Adam Jonas, an analyst at Morgan Stanley, joined the chorus of analysts saying margins come top of mind. A Morgan Stanley analyst said he saw estimates as low as 16% to 20% for Tesla’s gross margin for the second quarter.
Ahead of the earnings, Kathy Wood sold off slices of her company’s Tesla holdings in back-to-back sessions, offloading more than 73,000 shares this week before the EV giant reports its second-quarter financials on Wednesday.
Cybertruck sends Tesla shares even higher
Tesla stated in its second-quarter financial statements that the Cybertruck “remains on track to begin initial production later this year at its Gigafactory Texas.” However, the EV giant added that it is “testing Cybertruck vehicles around the world for final certification and validation.”
The company also said it continues to “make progress” on its next-generation platform.
“We can’t wait to start delivering it later this year,” Musk told investors Wednesday, referring to the Cybertruck.
Over the weekend, Tesla tweeted a photo of Tesla’s first ever Cybertruck built at its Austin factory. Tesla stock responded on Monday, jumping 3.2% to 290.38.
“Now that the first EVs are rolling off the line in Texas, the fun can begin,” Morgan Stanley analyst Adam Jonas wrote on Tuesday.
TSLA stock rose 2.5% last week to 281.38, hitting a new intra-day high of 2023 on Friday. Tesla is up 136% in 2023. Shares are running 313.80 long points from a deep consolidation dating back to late September, according to MarketSmith Analysis.
Tesla Stock: Global Delivery Record
TSLA reported record global deliveries in early July — as price cuts, tax breaks and rebates drove demand well above Wall Street’s expectations.
Tesla deliveries reached 466,140 in the second quarter, surpassing the first quarter’s record of 422,875 and the fourth quarter’s record of 405,278. Deliveries of the Model 3 and Y were 446,915 in the second quarter. Shipments of the Model S and X were delivered through 19,225. Production reached 479,700, again surpassing deliveries, even as Tesla cut production below capacity.
Tesla’s global vehicle inventory reached 16 days at the end of the second quarter, up one day in a row and up 300% from last year.
Musk said Wednesday during the second-quarter earnings call that the company still aims to produce 1.8 million vehicles in 2023. Musk has consistently underestimated the production number of 2 million he used at the end of the fourth quarter.
However, Musk added that production in the third quarter is likely to “drop a little bit” due to the summer shutdown for plant upgrades.
On April 19, Tesla reported a significant drop in first-quarter earnings while revenue missed sights. The global electric car giant’s profit margins fell below 20% as the company implemented an aggressive price-cutting strategy in the early part of 2023.
The EV company’s gross profit totaled $4.5 billion in the first quarter. Tesla’s gross margin was 19.3%, down from 23.8% in the fourth quarter and 29.1% a year earlier.
Tesla stock ranks third in IBD Automotive Group. It has a composite rating of 98 out of 99. Tesla has a 96 relative strength rating and its EPS rating is 93 out of 99.
Please follow Kit Norton on Twitter @employee for more coverage.
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